HL Deb 28 February 1887 vol 311 cc671-8
THE DUKE OF MARLBOROUGH

, in rising to call the attention of the House to the terms of reference in the instructions to the Royal Commissioners appointed 21st September, 1886, to inquire into matters connected with the currency of the United Kingdom of Great Britain and Ireland; and to ask Her Majesty's Government, If they would consent to amend the terms of reference for the purpose of including in the scope of the Inquiry before the Commission a special reference to Agriculture, namely, as to whether the appreciation of gold and the difference in the exchange value of the rupee in England and in India had had any special effect on the agricultural industry of the United Kingdom; and whether the continued fall in the value of all agricultural produce, and consequently of the selling value of land in England and Ireland, was in any degree attributable to a disturbance of values brought by currency complications? said, he had very great hesitation in bringing the subject before their Lordships, not only on account of the extremely uninviting character of the subject and the difficulty of dealing sufficiently with all its details, but also because it was one that required a long and careful statement. Questions connected with the currency had formed the subject of inquiry to many persons, and at the present time a great portion of the Press, especially in the North of England, was filled with daily contributions on this subject from persons who were connected with trade and agriculture. The subject had been brought prominently to the notice of their Lordships in the report of the late Lord Iddesleigh's Commission on the Depression of Trade. It had been brought to his (the Duke of Marlborough's) attention in attempting to arrive at some ground for explaining to himself the reasons for the great commercial depression which had extended over every branch of our industries. In studying the question it appeared to him—as it did to that Commission—that the appreciation of gold and the difference in the exchange value of the rupee in England and in India had a wider bearing on the existing depression than was sometimes acknowledged. There was nothing more certain than that the one object which they should seek to arrive at was the stability of value. As this country became more divided by an advancing civilization into the two classes of creditor and debtor, of capital and labour, it became more and more necessary that the relations between them should be of a fixed and permanent character. Generation after generation pledged the credit of the future generation which succeeded; and unless the medium of exchange which was the standard of value was of a fixed character the one class would suffer for the advantage of the other. Now, it was his object to lay before their Lordships certain arguments and reasons which bore upon the subject from the point of view of whether any one of those interests had suffered to the advantage of the other. History taught that stability of value in trade was the invariable accompaniment of political quiet and contentment, and wherever we found the classes engaged in trade suffering in their manufactures there one always found political unrest and disquiet. The fluctuations in trade and in the exchanges of value had been aptly compared with the diurnal phenomena of oceans and storms. Of such phenomena Lord Liverpool was an early observer; for it was in 1805—he (the Duke of Marlborough) thought—that he (Lord Liverpool) laid down his theories as to the principles upon which our currency should be based. He was unfortunately accepted as a true prophet in his day, but, nevertheless, he spoke with hesitation as to the consequences of his theory and the results of the legislation he proposed. On page 161 of his letter he said— I do not pretend that a new system of coinage founded on the principles which I have endeavoured to establish will be in all respects perfect; for the nature of the subject does not admit of absolute perfection. I am sensible that it will be liable to the first of the imperfections stated in an earlier part of this letter—that is, that the metal of which this standard coin or principal measure of property is to be made will vary in its value in successive periods, even with respect to itself. It has been shown that this imperfection is so inherent in the subject that it does not admit of a remedy. This variation may be occasioned either by a greater or less production of the mines from which one or other of these precious metals is obtained. When, however, Lord Liverpool's legislation was adopted by this country, the enormous expansion in the volume of trade was not and never could have been foreseen any more than the enormous effects brought about by the introduction of steam and electricity in altering the whole conditions of our mercantile arrangements. Now, the important tact with, regard to this question was that as the volume of trade had expanded the volume of the currency had remained the same. It was manifest that if the volume of produce decreased very rapidly and the volume of currency remained stagnant prices would rise; wherever, on the other hand, the body of currency diminished and the volume of produce increased there was a fall. The question then arose in what degree the depression of trade since 1870 had been brought about by a scarcity of the currency. He thought that it could be shown that the whole of our commercial and agricultural depression was owing to the appreciation of the gold standard. From statistics which were available it could at once be seen whether the production of gold was increasing in a sufficient ratio as compared with the increasing volume of trade. Previous to the year 1870 the large discoveries of gold in California and in Australia had caused some £30,000,000 of gold to be poured into Europe. Since 1870, however, the production of gold had fallen to £ 17,000,000 annually, nearly one-half of which was absorbed by the arts. Therefore, during the last 15 years there had only been Borne £130,000,000 of gold available for the currency of the world. Moreover, during the whole of that time there had been great demands made upon the gold resources. Thus, since 1873 Germany had consumed £80,000,000, the United States £100,000,000, and Italy £20,000,000 in replacing their silver by a gold currency, making a total of £200,000,000 of gold which had been absorbed by those three nations. During the same period India had likewise absorbed some £4,000,000 of gold annually. Nothing was more curious in connection with that question than the fact that the output of gold and silver taken together had hardly varied at all during the period to which he had referred. In 1870 the output of gold was £21,500,000, and in 1885 it was £17,000,000; whereas in 1870 the output of silver was £10,333,000, and in 1885 it was £21,000,000. Therefore, the combined output of gold and silver was £31,700,000 in 1870 and£38,000,000 in 1885. Those figures showed a slow but healthy growth in mining industries which was consistent with the rise in the volume of trade. Therefore, if silver had not been demonetized we should not have suffered from the great commercial crisis through which we were now passing. A well-known Member of the other House of Parliament had delivered an address on this subject which was well worthy of attention. Mr. Samuel Smith, M.P., in referring to the fall in the value of gold and silver taken together, said— Allowing that there are about equal values of the two metals in the world, in place of gold values falling 40 per cent and silver values 10 per cent, in silver countries there would have been an average fall of 25 per cent all round. The last crushing 15 per cent falls with crushing effect upon trade. How did this appreciation of gold and this depreciation of silver affect the two great classes in this country which represented capital and labour, or perhaps he might say creditor and debtor? Capitalists of all descriptions found that the 3 or 4 per cent which they received in the shape of interest upon their funds had a greater purchasing power than it had formerly, while the manufacturer had had to sacrifice more and more of his produce every year to pay his gold debt. It would, perhaps, be useful for him at this point to call attention to England's standing capital account. On the capital side of the account must be placed the public Debt of £750,000,000, bearing £23,000,000 interest; railway bonds and preference shares, £500,000,000, bearing £20,000,000 interest; municipal debts, £160,000,000, bearing £6,400,000 interest; land mortgages, £500,000,000, bearing £20,000,000 interest; capital mortgages, £500,000,000, bearing £20,000,000 interest; town rents, £30,000,000 a-year; mining royalties, £8,000,000 a-year; and annuities, £18,000,000 a-year. This gave a total capital of £4,000,000,000, which was probably about half the capital of the country, bearing interest to the amount of £150,000,000 per annum, which had to be paid out of the labour produce of the country. One peculiar feature of the present state of things was that the money market was in a perpetual state of commotion, that there were constant fluctuations in the Bank rate, and that the trader was continually involved in difficulties which it was impossible for him to foresee beforehand. There was much difficulty at the present time to find any really good and sound investment for capital. If it were possible to find any substance which could be made to serve as a legal tender in place of gold for the payment of debts and of taxes, there would be a cessation of those difficulties which were connected with the fluctuations of the Bank rate—that was to say, that the banks would no longer be able to make a large profit out of the depressed condition of trade. It had always been the case, from time immemorial, that silver had been a legal tender in this country, and it was still a legal tender among 700,000,000 of the population of the world. A paper currency would not pay debts, because its value depended upon its foreign exchange. If silver could be used today at its market value to discharge debts its value would rise permanently to 15½ to 16 to 1 compared with gold. It was remarkable how exactly the value of wheat rose and fell with that of silver. This Commission had been instructed to inquire into the effect of the rate of exchange upon the trade of this country with India during the last 20 years. The Commission was instructed to inquire whether there had been an appreciation of the gold and a depreciation of the silver standard; but there was no Instruction to the Commission to inquire into the effect, if any, which had been produced upon our agriculture, and to ask whether agriculture in this country was suffering from a state of things in which a bonus was given to the Indian cultivator, which bonus was withdrawn from the English. In England and in our Colonies we had a gold currency; in India we had a silver currency; and therefore we had, by some means or other, to try to arrive at a stable exchange between the two. If there was a silver currency in so near a country as Scotland, while we had a gold currency in England, we should at once see the falseness of the position. As silver became of less and less value in England, Scotchmen would be able to export their cattle at cheaper prices to the disadvantage of the English agriculturist, and we should not long stand such a state of things. The question of the currency had an intimate bearing on the whole social relations of the country, since it affected the debtor and the creditor, and if the interest of the one was advanced to the detriment of the other we should have instability in the social condition. The noble Duke concluded by asking the Question of which he had given Notice.

THE PRIME MINISTER AND SECRETARY OF STATE FOR FOREIGN AFFAIRS (The Marquess of) SALISBURY

The noble Duke (the Duke of Marlborough) has approached the subject in a very interesting speech—a subject which often elicits high individual ability, but which, according to my observations, seldom attracts very enthusiastic attention on the part of any assembly. I do not presume to be confident in following the noble Duke into the very abstruse portions of his speech; but I may say, in answer to his Question, that I have put myself in communication with the Chairman of the Commission which is appointed to inquire into the subject, and he assures me that the terms of Reference under which they act include the matter which the noble Duke desires to see included—namely, the effect which the appreciation of gold and the undoubted difference in the exchange value of the rupee has had upon the agriculture of this country. I feel the greater hesitation in following the noble Duke because most of the matters to which he has referred are sub Judice in this Commission; they are precisely the matters to which the Commission is giving its attention, upon which it is receiving a great deal of evidence, and upon which we may hope to have a deliverance before long. I agree with the noble Duke as to the extreme importance of the question. It is important to agriculture as well as to all branches of production in this country. It is not in itself abstruse, it is very obvious, that if the price of gold is rising, the price of other produce for which gold is given will fall, and the position of the producer, whether manufacturer or agriculturist, is this—while the price of his produce falls immediately, the interest of the capital which he has borrowed to carry on his business does not fall at all, and the wages which he pays his workmen do not fall for a long time, for men are very tenacious of the nominal rate of wages. It therefore follows, as a matter of course, that any fall of the standard of value must bear hardly upon all producers, and upon all those who sustain the commerce and manufacture and agriculture of the country—on all those, in short, who gain their livelihood not so much by labour as by risk. But when the noble Duke goes on to say—as I understand him to say—that the whole of the suffering which the land has experienced during the last few years is due to this appreciation of gold, I think he exaggerates its effects a good deal. There have been too many obvious causes besides the appreciation of gold under which the landowner and land occupier suffer. There has been a succession of the most unfavourable seasons, and the extreme competition of America, which is not produced by any fall or rise in the standard of values but simply by the acceleration in the methods of communication, which undoubtedly, in the first instance, has produced this fall of prices from which agriculture suffers the question, again, as to the remedy is not, in my judgment, so simple as the noble Duke deems it to be. It would be rather hasty to speak positively before we have the evidence of the Commission before us; but it is by no means proved that any Government has it in its power to remedy this disturbance of the standard of value, even though we admitted that this disturbance is guilty of all the results which the noble Duke imputes to it. There are several things to be proved which are not proved yet. We must show that it is possible for us to get rid of the difference of standard which exists between England and India, or, we might say, between India and Europe. Everything which we have been able to learn shows that it would be a task of the extremest difficulty, and it is a task from which all Indian statesmen have shrunk. You cannot deal by logical propositions with the sentiments of a people—still less with the sentiments of a people numbering such multitudes as are found within the confines of India, so deeply attached to the conditions under which they have lived for centuries past. I have seen schemes for altering the standard in India; I have no doubt the noble Viscount beside me (Viscount Cross) and the noble Earl opposite (the Earl of Kimberley) have seen such schemes; but I have seen none that would commend themselves to the judgment of any Ministry. Again, any advantage to be produced by the bi-metallic remedy, supposing it were possible—which has not been proved—to establish a permanent relation of value between silver and gold, and to prevent circumstances from altering their substantial values when the nominal values are fixed by law, you could only realize by an agreement among all the coin-using nations of the world. What chance is there of that? I am afraid we must advance very much more than we have done in the path of International Concert before any such achievement can be anything but a speculation. My Lords, these are very interesting subjects, but they are far too abstruse to be dealt with in an Assembly such as this. They have been referred to a Commission, which is examining them with great care, and which, I trust, will before long give matter for consideration to those interested in the question. I can assure the noble Duke and the House that the matters of profound importance to which he has called attention are being the subject of the investigation of the Commission, and they will give them all the consideration in their power.